Increasing CPM has become a challenge for many companies investing in digital advertising campaigns .
With increasing competition on advertising platforms such as Google Ads, Facebook Ads and Instagram Ads , the amount paid for impressions has skyrocketed, affecting the return on investment (ROI) of many businesses.
In this post, we will explore the impact of increased CPM and how we can combat it, using efficient strategies to maintain competitiveness in campaigns.
Understanding CPM
CPM is one of the most elementary metrics in advertisement campaigns, mostly for those brands and products, which need visibility.
This measurement enables advertisers to calculate the number of impressions their ad has made based on the numbers of clicks and conversions. Put simply, this measures the impression of the advertisement.
Definition and calculation of CPM
CPM (or Cost Per Thousand Impressions) basically refers to the amount an advertiser pays to have their ad displayed a thousand times to specific users.
It’s very simple: you divide the amount of expenditure of a campaign by the impressions and multiply it by one thousand. And this makes it quite visible as to what you are getting paid for in terms of each thousand views of the ad.
How CPM is used in online advertising campaigns
CPM is widely used in brand awareness campaigns , where the main objective is to expose as many people as possible to a message or product.
This is one of the best metrics for businesses that are interested in expanding the brand presence, and they may not necessarily have an immediate goal of generating conversion.
The choice to use CPM depends on the nature of the campaign. For instance, if it is a product launch or event promotion, where visibility is critical, this metric becomes very important to ensure that the largest possible number of consumers come into contact with the message.
In addition, CPM is also very common in the use of display ads, including banners and video ads, whose goal is to maximize visual exposure.
Current competitive landscape in advertising
In recent years, digital advertising has undergone a true revolution, becoming one of the main ways to promote products and services .
Google Ads, Facebook Ads and other advertising platforms have become true battlegrounds, where large and small companies fight fiercely for the public’s attention.
With this growing number of businesses advertising online and increasing competition , the constant rise in CPM is inevitable.
Growth of competition on digital platforms
With the realization by more businesses into the potential of digital marketing, advertisers on such platforms as Google and Facebook keep multiplying.
What once presented itself as an opportunity affordable for any company is now becoming more expensive and competitive. The major brands today do not even blink before paying millions of dollars to acquire significant visibility on the said platforms.
But this competition is not only among the big players in the market; it also includes small and medium-sized businesses that are now investing more in online advertising, making the space even more saturated.
Sectors most affected by high competition
While rising CPMs are affecting virtually every industry, some are particularly vulnerable to high competition. Companies in e-commerce, technology, financial services , and education are facing the most significant challenges.
In e-commerce, for example, the competition for consumers during events like Black Friday causes advertising costs to increase dramatically.
Similarly, the technology and finance sectors invest heavily in campaigns to attract consumers looking for specific solutions, driving up the cost of advertising.
These sectors, which traditionally spend more on digital marketing, are willing to invest large amounts to ensure a prominent position in the digital environment, generating high competition among their players.
Recent trends in increasing advertising spending
Indeed, the past few years have witnessed this trend of online advertising spending becoming inevitable. Statistics indicate that this trend will continue in the coming years with the advancement of digital transformation and growth of the advertising platforms.
Companies are investing more resources into digital because consumers are increasingly shifting to the online environment and to maintain their presence across multiple channels.
New trends are also emerging in the use of new ad formats and expansion into emerging platforms. For instance, growth in social networking sites such as TikTok and increased advertising through videos and audio streaming have positioned advertisers for further diversification in their marketing strategies.
These platforms still offer more affordable CPM advertising opportunities than ever before, but the competition on them is rapidly increasing.
How to combat CPM increase?
Increasing CPM may be unavoidable, especially in more competitive niche markets and during high-demand seasonal periods like Black Friday.
However, there are several effective ways to minimize this impact, without compromising the quality and visibility of your advertising campaigns.
The key to combating rising CPMs is adopting best practices that help optimize your ads , improving performance and maximizing return on investment.
When facing increased costs, it is essential to review the strategy as a whole, focusing on points such as audience segmentation, the use of less competitive keywords and the diversification of advertising channels.
The best practices that will be discussed below play a crucial role in optimizing advertising campaigns and controlling costs.
Optimization of advertising campaigns
Optimizing advertising campaigns is one of the most efficient approaches to combat rising CPM and improve return on investment (ROI) .
With the best strategies that would maximize the efficiency of each real invested, it is possible to reduce the blow of the high costs and bring better results, even in competitive scenarios.
Optimization means optimizing different parts of your campaign, such as targeting, testing, and so forth.
Below, we cover two essential practices for this optimization: precise audience targeting and A/B testing to improve creatives.
Precise audience segmentation
Correct targeting ensures that ads are shown to people who are most likely to be interested in the product or service you are offering , which increases the chances of conversion and reduces the cost per acquisition (CPA).
Platforms like Google Ads and Facebook Ads offer advanced targeting features that allow you to target ads based on a variety of criteria.
When adjusting your targeting, it’s worth exploring different audience combinations and testing new approaches , such as focusing on smaller but more specific audiences, or audiences that resemble your best customers.
This can result in a higher cost per impression, but a higher conversion rate, offsetting the increase in CPM.
Smart use of keywords
Strategic use of keywords is one of the most effective ways to optimize ad campaigns , especially on search platforms like Google Ads.
In a scenario whereby CPM keeps increasing because of high competition, the right keywords will help minimize its impact while simultaneously enabling the improvement of ad performance.
Selecting relevant less competitive keywords will bring you qualified audiences at lower costs per thousand impressions, which will therefore translate into a more efficient ROI.
Identifying less competitive but relevant words
In a search campaign, competitive keywords will inflate the cost of your campaigns. This is because Google and Bing use an auction system in which advertisers are competing with each other to show their ads based on the keyword that they choose.
The more people competing for the keyword, the more money it will take to secure your ad, meaning your CPM is going to be higher.
A smart solution to avoid this increase in costs is to bet on long-tail keywords . These words are longer and more specific search terms that have less competition but are still highly relevant to the target audience.
Long-tail keywords not only reduce competitive pressure (and therefore CPM), but they also improve the quality of traffic you attract. Users who search for long-tail terms are usually closer to making a purchase decision or taking an action, which increases the chances of conversion .
Diversification of advertising channels
An effective strategy to combat rising CPM is to diversify advertising channels, exploring new platforms and advertising formats.
Relying solely on major advertising platforms like Google Ads and Facebook Ads can limit your options and expose your campaigns to the same cost-increasing factors caused by competitors.
By diversifying, you can expand the reach of your campaigns and find marketing opportunities that are more affordable and less saturated, as well as reach new and different audiences.